Markets: A Yellen rallyLook for an even lower and slower path for rates than the market had priced. That was the message delivered today by Fed Chair Yellen in the first speech by one of the committee’s most influential members since the March FOMC meeting.

Yellen highlighted the risk created by a slowing economy in China and falling oil prices. But she credited the markets with cushioning the risk by pricing in more Fed accommodation and lowering rates. The pluses for the US, according to Yellen: improving job growth, employment-to-population, consumer spending, income, household balance sheets, housing and fiscal policy. The negatives: weak manufacturing, net exports and business investment. The economy should get a lift eventually from stabilizing foreign economies, she said, a stable dollar and increased US household formation. Although her outlook still seemed more bullish than the market’s, she noted that if she’s wrong, it will be harder to fight deflation and a weakening US economy than to fight inflation and strength.

The bond and equity markets rallied almost immediately after she started speaking at 12:20 pm to the Economic Club of New York. Spreads on 5-year investment grade credit default swaps tightened nearly 2 basis points. MBS widened slightly. (Milepost).

Economics: Help from housingHours before Fed Chair Yellen pointed to housing as a source of continuing support to the US economy, Case-Shiller delivered some evidence. The S&P Case-Shiller 20-City Composite home price index (SA) increased 0.8% MoM and 5.7% YoY in January. All 20 cities have posted monthly and yearly gains for every month since September. Eleven cities reported greater yearly price increases in January 2016 and in than January 2015. The S&P Case-Shiller report comes after S&P's projection earlier this year of a 2016 gain of 5%-6% in US home prices. (S&P).

Markets: steady headwinds to private MBS securitizationNearly eight years after the financial crisis, the market for private MBS securitization is still nearly dead. According to the rating agency Kroll, prime jumbo securitizations accounted for 38 deals in 2015. So far this year, only two prime jumbo deals have come to market, with a third just announced. And at least two issuers have said they are no longer doing securitizations of this product. As recently as 2013, demand for jumbo loans drove their yield below the yield on conventional MBS. But securities were suffering from formidable competition on the whole loan side. Banks were holding a lot of jumbos in their portfolios, keeping them out of the securitization market. History repeats itself. (Corelogic).